Industry news

Capgemini has today sealed an £83 million deal that will see it continue to provide IT services to Croydon Council for the next five years. The contract will form a key part of an ongoing programme of transformation at the local authority.

Capgemini’s remit will cover telecommunications infrastructure and networks, the management of some 4,000 desktop computers and the Council’s key business applications including finance, procurement and customer service. The IT outsourcer will also provide consultancy expertise to support the wider transformation of local services.

Nathan Elvery, Director of Finance and Resources at Croydon Council, said: ‘Capgemini has already proved key in helping Croydon to achieve a step change in our IT effectiveness and overall business efficiency. They have demonstrated that they understand our needs and have been able to deliver innovative IT services on time and within budget.’

The Council hopes the contract will enable it to accelerate its programme of service transformation, investment in new technologies such as a new wireless network infrastructure, the upgrade of systems and hardware and a new Council-wide Geographic Information System. 

The two organisations have worked together since 2003 under a Private Finance Initiative (PFI) contract, and the extension to 2013 will make the contract one of the biggest and longest-running in UK local government.

Microsoft is expected to report fiscal third quarter earnings of 44 cents a share with sales of $14.5 billion. Analysts expect Microsoft to increase those numbers and raise its outlook for fiscal 2009.

The International Association of Outsourcing Professionals (IAOP) has compiled the initial alphabetical list for the third annual ranking of the world’s best outsourcing service providers - The Global Outsourcing 100.

The lists include companies from around the world providing the full spectrum of outsourcing services – not just information technology and business process outsourcing, but areas such as facility services, real estate and capital asset management, manufacturing, and logistics.

The complete ranking and sublists will be published in Fortune magazine next month, and discussed here. The IAOP says that the evaluation process mirrors that employed by many top customers and considers four key criteria: 1. Size and growth in revenue, employees, centers, and countries served. 2. Customer experience as demonstrated through the value being created at the company's top customers. 3. Depth and breadth of competencies as demonstrated through industry recognition, relevant certifications, and investment in the development of people, processes, and technologies. 4. Management capabilities as reflected in the experience and accomplishments of the business's top leaders and its investment in management systems that ensure outsourcing success.

The complete alphabetical listing of the top 100 companies (101, due to a tie score) is as follows: 24/7 CUSTOMER Accenture Achievo Corporation ACS Aditya Birla Minacs ADP Amdocs ARAMARK ATS Auriga Beyondsoft Bleum Cambridge Capgemini Cartus CBRE Ceridian CGI Group Ci&T Software Cognizant Colliers International Comprehensive Health Services CompuPacific Convergys Cross-Tab Marketing Services CSC Cushman & Wakefield Cybage DataArt Datrose Diebold Donlen Eclipsys EDS EMCOR Emerio EPAM Systems ExcellerateHRO EXLService Firstsource Freeborders Genpact HCL Technologies Headstrong Hewitt Hewlett-Packard Hexaware HiSoft HOV Services Hundsun Global IBA Group IBM ICG Commerce Infosys Innodata Isogen Inspur Intetics IPT ISS A/S IST ITC Infotech Johnson Controls KPIT Cummins KPN/Getronics LawScribe LogicaCMG Luxoft Mastek MERA NN Mindcrest MindTree Consulting MphasiS NCR Corporation NCS Neusoft Objectiva Software Solutions Oce Business Services Ocwen Financial Outsource Partners International Patni Pitney Bowes QuEST SITEL Smart Sourcing SNC-Lavalin Profac Sodexho Alliance SPi Stream Summit HR Worldwide Sutherland Global Services Symphony House Berhad Syntel Tata Consultancy Services Tech Mahindra Unisys vCustomer Vertex Wipro Technologies WNS Xerox Zensar Technologies

Logica's restructuring announcement has been slammed by analysts as being less a strategy and more a plan, and follows in the wake of a fumbled outsourcing strategy announced earlier this year. CEO Andy Green's honeymoon period would seem to be over, and further tough decisions lie ahead.

The services company has announced that it will invest £110 million in a restructuring programme to save £80 million annually from 2010. In the short term, this involves the loss of some 1,300 jobs in Europe – about two percent of the European workforce overall, including 500 UK workers.

Globally, Logica aims to double its offshore and nearshore headcount by 2009, with India being the greatest beneficiary.

CEO Andy Green, who took charge in January this year, has said he wants to reduce costs and minimise job duplication, and then move forward with an improved concentration on outsourcing – which he aims to shunt towards a 35% group revenue share – and offshoring.

Logica says the ongoing savings will be reinvested to boost sales and marketing capability.

Despite this, analysts at Ovum have greeted the announcement with the response that it is “a plan, not a strategy”, while acknowledging that Logica has set targets for revenue growth and margin improvement in 2009 and beyond.

The analyst firm believes that while the CEO's diagnosis of the company's ailments is correct, his response lacks the essential strategic vision a leader should supply – especially in a chilly economic climate.

Ovum analyst Phil Codling said: “The focus on growth is a no-brainer; Logica needs growth, particularly in two key European markets, UK Commercial and Germany, and it has to become more proactive and more sales-led if it's going to achieve that.

“A cost-cutting plan is another no-brainer; Logica will cut non-billable back-office staff, shift headcount to offshore, and rationalise buildings (40% reduction in deskspace).

“So having got the diagnosis largely right, what Green has unveiled is more of a plan than a strategy: it's about execution not vision, it's largely a continuation of the existing direction rather than anything radically new.”

Ovum's analysis is that what was missing from Green's forward-looking announcement was a sense of renewed vision and strategy to lift Logica out of its troubles – something the company sorely needs after losing one CEO last year and fumbling its recent outsourcing announcement, as reported in News Analysis earlier this year.

By creating an Outsourcing division shortly after Green's accession to the Logica throne, the company indeed singled that out as a strategic priority. However, the establishment of the new division under former acting CEO Jim McKenna was rather undermined by news that McKenna will leave the company later this year: a classic case of office politics getting in the way of business change.

That said, if outsourcing becomes a horizontal layer in the organisational matrix – to use Ovum's analysis – then it can share skills across the organisation and feed up into local territories for local selling.

Ovum's view is robust: “We'd now like to see similar clarity of purpose around prioritising the markets and opportunities that Logica intends to pursue. It can't be equally determined to go after each and every opportunity. Even IBM doesn't attempt to do that, and Logica is nowhere near the scale of IBM, even in Europe.

“Andy Green has shown himself to be a good analyst – now let's see the vision and focus to take Logica to the next level.”

Indian services giant Satyam Computer Services has followed disappointing financial results with the announcement of two prominent acquisitions. Satyam has acquired Caterpillar’s MR&CA intellectual property and assets for $60 million. Satyam will also launch a business unit to provide MR&CA solutions and services globally to Caterpillar and to its other customers in various industries.

The acquisition will strengthen Satyam’s relationship with Caterpillar. Satyam will now support Caterpillar in segmentation, promotions, forecasting, new product development, service, validation, and customer survey execution, among other areas.

“We were honored to be named one of Caterpillar’s few strategic partners in 2005, and this acquisition further demonstrates the trust both organizations have in each other,” said Satyam chairman B. Ramalinga Raju. “It also accelerates development of our business transformation capabilities and further enhances our end-to-end business solutions, from strategy on through to BPO [business process outsourcing]. It is a significant step in our march toward becoming true business transformation partners with our customers.”

Caterpillar’s MR&CA IP and assets will complement Satyam’s business consulting capabilities, industry knowledge, and market research processes, says Satyam, enabling it to establish itself at the forefront of a substantial knowledge process outsourcing (KPO) market.

According to a NASSCOM study, the KPO industry worldwide will reach $17 billion by 2010, with India accounting for about $12 billion of that total. Market research and analytics – tools and processes inherent in organisations’ strategic planning – will constitute about 25 percent of that sum. Satyam is well positioned, thanks to the acquisition, to offer these strategic services to the greater marketplace.

To accommodate Caterpillar’s MR&CA requirements, as well as those of other organisations, Satyam will launch innovation centers in India, Europe, North America, Latin America and Asia Pacific. It currently operates centres in the US, Canada, Brazil, the UK, Hungary, Egypt, UAE, India, China, Malaysia, Singapore, and Australia.

Satyam has also announced the acquisition of S&V Management Consultants, the Ghent, Belgium-based supply chain management (SCM) consulting firm. The $35.5 million, all-cash purchase reinforces Satyam’s supply chain strategy capabilities. “We are excited to acquire an established SCM firm that is respected for its innovative, high-quality, and high-end supply chain strategy services,” said Satyam chairman B. Ramalinga Raju. “S&V’s entire team is renowned for its exceptional capabilities and we look forward to having our customers to benefit from that expertise.”

S&V was founded in 1992, and has offices in Belgium and the Netherlands. The $15 million firm develops supply chain strategy and performance, and supply chain process excellence solutions, largely for manufacturing and pharmaceutical companies and public entities. S&V features 60 consultants, all of whom are Six Sigma-trained and APICS-certified, and fluent in English, Dutch, and French.

As a part of this transaction, Satyam also acquires business decision support software Equazion, a supply chain performance management suite.

“We are pleased to become part of the Satyam family, and to leverage its world-class business process and technology skills, global resources, and relationships with high-profile customers,” said S&V co-founder and partner Peter Verstraeten. “At the same time, we look forward to making our expertise and assets, including our robust software, available to our new colleagues and their customers.”

Several factors make the agreement ideal for Satyam, said Raju. Acquisitions work best when the absorbing organization gains leadership capabilities, customer relationships, higher value services, brand enhancement, and new competencies.

S&V will operate as a fully owned subsidiary of Satyam for the near future, maintaining its name and brand. However, it will become a part of Satyam’s Consulting and Enterprise Solutions team.

• Satyam does not appear in this year's Global Outsourcing 100, published by the International Association of Outsourcing Professionals.

Homeworking is still not in the top five options being used to create flexibility in contact centres, says new research, despite the widespread availability of high-speed broadband and advances in technology that make so-called 'homeshoring' (working from home as part of a distributed, virtual call centre) viable.

The 2008 Flexible Working Survey shows that improving efficiency is still the main reason for flexible working, but delivering an improved work/life balance to employees is now rated nearly as important.

The benchmark survey analysed responses from all industry sectors and was conducted earlier this year by the Professional Planning Forum, an independent industry body that supports effective resourcing, planning and information analysis in the contact centre industry.

The survey finds that over 50% of centres have not considered homeworking as a viable option, or have discounted it entirely. It also shows that part-time staff remains the principle option for many call centres to deliver staffing flexibility, with 63% of centres having between 20-40% part-time employees.

However, while part-time workers deliver flexibility they also present challenges, suggest many respondents to the survey, which includes comments such as “Spans of control for team managers are lower so cost is higher”; “Often people accept part time hours and then ask to change them in the first 6 months”; and “Requests for hours within the school run, poor evening cover delivered”.

"This research forms part of the Flexible Working stream we are developing, to support the demands of employees, businesses and government legislation on flexibility,” explained Steve Woosey, membership director of The Professional Planning Forum. The Forum, established in 2000, is an independent industry body that supports effective resourcing, planning and information analysis within the contact centre industry.

Looking at homeworking more closely, the research revealed a number of differences between expected and realised benefits. For example, those implementing homeworking expect to see most benefit in employee work/life balance and reduced absence. However, centres already using homeworkers have also seen big improvements in coverage of opening hours and improved service to customers. Enabling homeworking, therefore, has many more benefits than most centre managers might expect. IT infrastructure, however, remains the top challenge for both.

Dave Vernon from the Professional Planning Forum sums up the findings, “Homeworking is on the cusp of moving from the fringes of flexibility options to the mainstream. While the perceived main benefits of improved attrition and better work/life balance are being delivered, associated benefits such as improved coverage of hours and improved customer satisfaction are also being realised by those companies at the forefront of this working solution.

"The main blockage still remains around IT Infrastructure and is a stumbling block for many. However, with technology progressing all the time and the number of companies moving down this road, this final blockage is all but remedied."

The countdown has begun to the launch party for sourcingfocus.com, which takes place in London next week on the evening of 30th April, at the Polka Bar in Poland Street, Soho. I very much hope to see you there at the official launch of what is, after all, your community, your portal, and your homepage for sourcing news, analysis, and opinion.

sourcingfocus.com will launch with some specially commissioned research into attitudes to outsourcing, which we will exclusively reveal next week. I can promise that it will make for a challenging read in these uncertain times.

Sourcing is in the mainstream news every week, as the economic downturn shifts many opinions away from the strategic, innovative and economic advantages of outsourcing to an exclusive focus on the threat from offshoring to local jobs.

It is rarely far from the lips of US presidential candidates, and the downturn means that outsourcing companies themselves are not immune to the political and economic turmoil that follows the slashing of local jobs to fund the expansion of an offshore workforce.

As Logica has discovered once again this week, in the wake of a restructuring announcement that sees 1,300 jobs being lost in Europe (see today's News Analysis), the vital element in a flatlining economy is the vision thing. Businesses – like markets, like countries – don't just need the steady hand of a prudent economic administrator; they need someone who can inspire and lead.

Logica's announcement has been dismissed by Ovum as a plan, not a strategy; one with a sound and grounded analysis, maybe, but lacking in vision.

See you next week.

Small and medium-sized businesses across the UK now have access to a range of corporate-grade business applications from a single supplier, says BT, with the announcement of BT Business’ partnership with two software as a service (SaaS) suppliers, NetSuite and SugarCRM. The announcement follows hot on the heels of NetSuite's OneWorld launch in San Francisco last week, as reported in last week's Editor's Blog.

With the trend of the rapid adoption of on-demand and SaaS software in the SME market worldwide, BT is taking steps to embrace the SME market in the UK by essentially reselling both companies' business applications.

BT's track record in this type of venture is not strong, but the demand for Internet-delivered business applications is growing, despite cultural resistance in some quarters to hosted, rather than on-premise, solutions. CIOs in particular see SaaS as a threat rather than an advantage, although the cost attractions in an economic downturn are leading many to reassess their attitudes and concentrate on business innovation rather than systems maintenance.

BT says that working with NetSuite and SugarCRM will allow the service provider to offer its small and medium-sized business customers software for their specific needs, coupled with service and support from a single source. The companies plan the integration of both NetSuite SugarCRM with existing data systems.

Recent research by BT Business revealed that client relationships are the most critical factor to the success of UK SMEs (43 percent), and both suppliers target the SME sector with a range of applications that aim for more transparent business process management.

BT is also currently looking at a range of best-of-breed business applications from leading vendors and is set to make further partnership announcements in the near future. Bill Murphy, managing director at BT Business said: “We have looked across the market and developed these partnerships with best-of-breed companies delivering innovative applications to meet the needs we know our customers have. This programme builds on the work we’ve done to date and will allow us to deliver a tailored approach for customers, so they can get what they need to manage their customer relationships, examine processes, deliver efficiencies and ultimately drive their business – all from a single supplier they trust.”

Zach Nelson, CEO of NetSuite said: “This commitment to the software as a service revolution will mean more and more SMEs in Europe have the chance to embrace NetSuite, enabling us to deliver capabilities to SMEs that some of the world’s largest companies have failed to achieve – even after spending millions of dollars.”

John Roberts, CEO of SugarCRM said: “This alliance strengthens our global reach and further exhibits SugarCRM’s momentum as a global provider of business applications.”

In an exclusive interview in San Francisco last week, NetSuite's Nelson issued a warning to the major services and outsourcing providers that as SaaS companies drive down the cost of enterprise business systems, customers would no longer be prepared to pay hundreds of thousands of dollars for services and consultancy, and that there would be an opportunity for what he called a "mid-market Accenture" that might emerge in the near future.

Clearly BT has a strong brand presence in the UK, and a decent reputation among smaller enterprises; however it will need to raise its game in the reseller business if it is to succeed as a mid-market services giant in the on-demand world.

Logica, the global IT services company, has announced plans to slash 1,300 European jobs, including moving some 500 UK jobs move abroad.

The £110 million restructuring plan will see Logica develop its Indian workforce and expand its nearshore offering.

With the move, Logica aims to drive its blended delivery model which combines onshore and offshore outsourcing, while saving £80 million a year from 2010.

Andy Green, CEO of Logica said: “We will be increasing our investment in growing the Logica business, funded by a cost-cutting programme that will reduce overheads [and] allow us to revitalise Logica, delivering sustained value for shareholders, customers and employees alike.”

See News Analysis for more.

Luxoft, a global provider of high-end software application and product development services, has opened a new delivery centre in Ho Chi Minh City, Vietnam. The opening marks the first time an Eastern European software service provider has established a presence in Vietnam. It also makes Luxoft Eastern European provider to offer a truly global delivery model.

“Companies today are looking for effective ways to cut costs and improve their bottom line without sacrificing quality,” said Dmitry Loschinin, CEO and President of Luxoft. “By enhancing our global footprint, we are proactively mitigating our clients’ cost pressures while preserving the culture of innovation, rock solid execution and engineering excellence that customers have come to expect from Luxoft.”

With delivery locations across EMEA, North America, Central and Eastern Europe, the addition of the Vietnam delivery centre further enhances Luxoft’s ability to provide clients with a full range of delivery. By opening an office in Vietnam, Luxoft is allowing clients to diversify their sourcing geography portfolio and lower outsourcing costs. It will service both ISV and enterprise customers and will offer a comprehensive set of application and product development services.

Luxoft’s clients will benefit from Vietnam’s relatively untapped skilled labour force, solid education system, high English proficiency, low attrition and competitive cost structure. NeoIT ranked Vietnam's Ho Chi Minh City as the top non-Indian city in its 2006 review of the most competitive cities for outsourcing, based on the available labour pool and infrastructure.

“Vietnam’s economy is booming and we offer a skilled workforce, a fast growing education system, political stability and lower costs,” said Mr. Truong Gia Binh, head of the Vietnam Software Association. “Luxoft is perfectly poised to take advantage of all we have to offer and deliver tangible benefits to its customers worldwide.”